What’s With the Rising Cost of Health Insurance in California?

In recent years, a strange phenomenon has emerged in the California health care scene. Hospitals across the state are merging under the umbrellas of several major companies, a move that is having a staggering effect on the price of health insurance. With continually fewer choices, hospitals and other health care providers are hiking prices accordingly, finding themselves with a captive consumer base.

Calling back to the monopolies of the past, a report out of UC Berkley suggests legislative action to intervene. “The significant variation in prices and ACA premiums across the state suggests regulatory and legislative solutions need to be implemented,” the report concludes. However, these price hikes are not universal across the state. Treatments for common conditions and medical emergencies range depending upon the region of the treatment.

Regional Differences

Northern California is typically the worst offender for increasing medical costs. While the state average for a medical bill comes out to $4,300, Northern California districts tend to have higher average costs. On the other hand, Southern California appears to be below average when it comes to medical costs, and middle California commonly hits the average.

Reports on these price discrepancies have been fairly conclusive: It is not related to the frequency of visits or hospital use by patients as much as the rising cost of health care itself. To expand this revelation, the rising cost of health insurance and hospital visits in California — itself a region of the U.S. — is not related to the frequency or behavior of Californians as much as the intrinsically rising cost of health care within the state.

Obamacare

While in-state, personalized insurance has been on the rise, some of the most staggering growth in insurance prices comes from the government-mandated Affordable Care insurance. With premiums rising over 12 percent in the past year — and over 13 percent the year prior — some have questioned how a system that should be unrelated to hospital and insurance provider mergers can continue rising at such a meteoric rate.

Obamacare was initially set up to provide a market check to large insurance providers. However, as the few remaining health care providers in and around California begin to raise their prices, the cost of Affordable Care insurance must rise in response in order to stay competitive in the field. As hospitals merge and insurance providers pull out or reduce their coverage for Californians, the price of all insurance — including Obamacare, which already holds grim prospects with a Republican administration and control of both Houses— will continue to creep higher.

State Intervention

In past cases of industry monopolization, some form of government intervention was necessary. As the Berkley report concluded, this may indeed be the case within California. Last month, state Attorney General Xavier Becerra agreed to open an investigation into the business practices of insurance and health care providers throughout the state. He will investigate the mergers themselves, which may be the result of noncompetitive business practices.

In this case, the fear relates to price fixing — that the insurance or medical providers are engaging in mergers to drive the prices higher artificially. This is a technically illegal practice, but is often difficult to prove in court, and will likely draw no support from the political right. Becerra has been vocally opposed to Republican efforts to undermine the current Affordable Care insurance program and is in the process of filing a lawsuit against the Trump administration for its decision to stop making subsidy payments to support the Obamacare programs.

Other Factors

American health insurance has been under assault for several reasons, all of which also have an impact on the gradual increase in rates. Though none of these factors impact the system in the short term nearly as much as the merging or vacating of hospitals or insurance providers, they will inevitably have some impact on the overall price creep.

Older demographics inherently use the health care system significantly more so than younger demographics, and stop contributing financially post-retirement. With baby boomers — a huge population bubble — hitting and exceeding retirement age en masse, the drag on the system is a significant one.

Likewise, some have floated the idea of denying coverage for pre-existing conditions. Mandated by the Affordable Care Act, insurers are currently unable to do this. Of course, pre-existing conditions often require regular and costly medical care, which is ultimately a drain on the solvency of the system. Eliminating this measure would inevitably lower the price of insurance for those without pre-existing conditions. Of course, thousands will be denied insurance coverage as a result.

The Price of Health

The significant growth of health insurance premiums throughout California has raised the ultimate question: How much are you willing to pay for your health? With two straight years of double-digit premium growth for Obamacare users, the quandary is growing increasingly worrisome. While there is no shortage of reasons for the price hikes, the way to mitigate the increasingly unaffordable insurance price tag is a big matter of discussion.